Shell plans to cut down on its exposure to U.S. natural gas prices and increase investment for oil rich shales marking its shift to an oil focused investment. This comes in the wake of low U.S. natural gas prices which have dropped to a 10-year low, while oil prices gained 40 percent in the past two years. Continue reading here..
The majors entered Australian unconventional assets, notably, starting 2008. British major BG made the first acquisition in QGC, on the same date exactly 4 years ago when it acquired 9.9% stake in QGC and 20% stake in its CSG assets. This deal was followed by Petronas acquiring 40% interest in Queensland LNG project from Santos for $2.5 billion. Supermajor ConocoPhillips joined the CBM party by acquiring 50% interest in Origin Energy’s CBM assets in Queensland for $8 billion-the largest and the most expensive deal in Australia CBM. Continue reading here..
President Barack Obama on Tuesday pledged support for the U.S. shale gas boom, but said government must focus on safe development of the energy resource.
In his State of the Union address, Obama called for government to develop a roadmap for responsible shale gas production and said his administration would move forward with 'common-sense' new rules to make sure drillers protect the public. 'America will develop this resource without putting the health and safety of our citizens at risk,' Obama said.
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There are many unconventional packages put up for sale, with most in the US or Canada. Given the flurry of unconventional deal activity recently, it wouldn’t be surprising if unconventional deal volumes and values reach record highs this year.
Jack Williams, president of the Irving, Texas-based ExxonMobil's XTO unit, which was acquired by ExxonMobil in June 2010, says that Exxon is looking to expand its shale gas holdings in more than a dozen gas-rich shale-rock formations worldwide. Exxon is also getting active internationally, starting hydraulic fracturing on formations in Poland this year and last week agreeing with China Petrochemical Corp. to jointly assess the resource’s potential in China. Although gas prices have been relatively low, Exxon is reportedly pleased with the returns they’re seeing with production from their unconventional assets, and particularly XTO’s assets.
This announcement by Exxon comes on the back of a series of multi-billion dollar deals involving unconventional (shale) transactions. Last week, BHP Billiton agreed to acquire Petrohawk Energy for $12.1 billion to expand its shale gas holdings in the US. Since June 1, companies including Exxon, Marathon Oil Corp. and Malaysia’s Petroliam Nasional Bhd have announced at least $7 billion worth of North American shale-gas deals.
The following table shows unconventional opportunities for sale recorded in Derrick’s “Deals in Play’ database, part of Derrick’s ‘E&P transactions’ database
Table 1: Unconventional opportunities available in US and Canada as of July 2011. Click on squares to get to the detailed deal sheet. Source: Derrick Petroleum Services. *HRB = Horn River Basin.
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There are currently 67 unconventional oil and gas packages for sale in the market. The majority of these packages are located in the USA (46) and most of them are either for unconventional oil (21) or unconventional gas (21). A large number of packages are for investments in undeveloped discoveries (30) and for investments in fields under development (20). Eagle Ford Shale has the most number of opportunities at 12 followed by the Marcellus Shale at 7. Most packages are related to selling undeveloped acreage (36), followed by Joint Venture related opportunities (17)
Marathon’s annual 2010 sales volumes averaged 391,000 boepd down 2% over 2009 average of 400,000 boepd from continuing operations. This is due to the result of planned downtime associated with the turnaround of production facilities in Equatorial Guinea completed in the second quarter 2010, natural field declines and asset dispositions. The company achieved 95% reserve replacement ratio for the annual year 2010.
Marathon announced $5.267 billion capital, investment and exploration budget for 2011, consistent with prior guidance and a 9% increase from 2010 capital spending. The company aim at liquids rich opportunities such as the Bakken, Anadarko Woodford,Eagle Ford and Niobrara resource plays in the U.S.
The company’s capital spending in the upstream segments is approximately $3.7 billion or 71% of total spending for 2011. This Upstream program includes spending of $1.3 billion on base assets ($1 billion on E&P base and $300 million on Oil Sands Mining and Integrated Gas), $1.9 billion on growth assets such as liquids resource plays in the U.S., and $465 million specifically for impact exploration.
With shale gas drilling going global, energy importing nations are evaluating their own geology, currently, to see if they have shale reserves that can be tapped. Likewise, Argentina which imports natural gas from neighboring Bolivia is set to win the global shale race where other countries in Asia, Europe and Africa are gearing up aswell. What is considered as the “game-changer” for the US, will shale gas success be replicated outside North America ,or for that matter, in Argentina?
Currently, Europe is in the limelight for being ahead of the shale gas activities, however, one needs to watch out who might be the next one?
Whats happening in Argentina?
In 2010, YPF announced a 4,500 billion cubic feet(Bcf) shale gas discovery in Loma de La Lata conventional gas field in the well known and productive Neuquen Basin in Patagonia.
The Company has also formed a $140 million joint venture with the Brazilian iron ore and mining multinational, Vale, which will use the gas to develop a $4.3 billion dollar potassium project in nearby Mendoza.
American Petrogas Inc, which holds about 16 exploration blocks, both for conventional and shale gas in the eastern and western parts of the Neuquen basin, thinks that its western blocks have the greatest potential for shale gas. It believes that about 100 tcf of gas is present in 9 of its blocks.
Indian Farmers Fertilizer Cooperative (IFFCO), a strategic alliance partner with American Petrogas Inc in Argentina has invited two government owned Indian companies, Oil India and GAIL , to invest in its shale prospects.
Apache Corporation expects to hold 900,000 net acres in the shale gas prone part of the Neuquen and has a partnership with YPF to develop shale gas in several prospective blocks. It is currently drilling the first horizontal multi fracture well in Argentina specifically to develop shale gas.
Total acquired an interest in 4 shale gas blocks in the Neuquen and will explore in partnership with YPF. This follows the acquisition of an 85% interest in 2 other Neuquen shale gas blocks recently. Total operates about a quarter of Argentina’s natural gas production.
Recent Shale Gas Transactions in Argentina
Global Distribution
Source: Hart Energy Global Shale Gas Study
The Society of Petroleum Engineers estimates 2,116 tcf of shale gas in South America.
Argentina – Neuquen Basin, Austral Basin
Colombia – “Cretaceous organic – rich shale source rocks are present in both the Maracaibo and Middle Magdalena basin of Colombia and Venezuela.
Peru – Ucayali Basin
As per Hart Energy Global Shale Gas Study, shale gas is plentiful around the globe. Conservative estimates place the total resource volume at about 20,000 Tcf. This volume is likely to increase as more shale gas plays are identified and evaluated.
However , the uncertainty still remains wheather the operators would be able to overcome the hurdles of tapping this source of stored energy. The biggest challenges to developing these resources outside of the US include:
Access to acreage / resource
Availability of rigs and skilled workforce
Access to water and environmental concerns about waste water
Finances, due to high cost of wells
Necessary infrastructure to transport the gas once in production
Shell aims to spend $1 billion a year on shale gas in China over the next five years if its exploration work currently underway proves to be a success. "It’s too early to say that shale gas is game changer in China but I have great expectations. We are drilling 17 wells this year in regions such as southwestern Sichuan province. That will give us a sense of magnitude of what's available here," said Shell chief executive, Peter Voser. China does not have any shale gas production yet, but has a rough target to pump some 10% of its total gas output from shale gas by 2020. "If we are successful, we are aiming to spend $1 billion a year over the next five years on shale gas," Voser said, adding that Shell was already spending $400 million on unconventional gas in China this year.
Chinese shale gas exploitation speeds up!!
China will start the bidding for eight shale gas blocks located in Guizhou, Chongqing, Anhui and Zhejiang in this year, and each block covers an area of 6,000-7,000 sq km, according to Zhang Dawei, deputy director of the Oil and Gas Resources Strategy Research Centre under the Ministry of Land and Resource (MOLR). According to MOLR’s Oil & Gas Research Centre, China is aiming to increase its shale gas reserves to 1 trillion cubic metres by 2020. The government is also expected to introduce new policies to encourage shale gas exploration, including the reduction or exemption of royalties and import tariffs and value added tax for the import of key equipment needed for shale gas exploration, according to Zhang.
Zhang has revealed that more companies, such as Sinochem Group, Xinjiang Guanghui Group and Zhenhua Oil Co Ltd, that have experiences in overseas petroleum and gas exploration are added in the bidders list. The participation of these private companies will break up the monopoly of state-owned enterprises like PetroChina, Sinopec, CNPC and Shaanxi Yanchang Petroleum in this market.
Shell’s presence in China is marked by these transactions
Just a year ago, Shell and CNPC signed a 30-year deal to develop another tight gas block Jinqiu in Sichuan province. Shell recently started drilling two shale gas exploration wells in Fushun Block in Sichuan province. ConocoPhillips will soon finalise terms with PetroChina for a shale gas production sharing contract for a block close to Statoil’s acreage. Also, Sinopecis in talks with BP and Chevron about potential co-operation. Not only the local private companies are interested in exploiting these Chinese shales, but also industry majors like ConocoPhillips, Statoil, etc.,
Nexen prioritizes its 2011 activities that include a continued ramp up of Long Lake, completing the development of Usan discovery with first oil production in 2012, sanctioning discoveries, proceeding with the development of Horn River shale gas lands, securing a contract extension in Yemen and continuing with the implementation of the exciting global exploration program.
The company expects 2011 production volumes to range between 230–270 kboepd, before royalties and capital expenditure budget ranges between $2.4–2.7 billion.
Nexen’s diversified portfolio of exploration and production (E&P) assets provides the company with a multi-year inventory of development projects and a positive long-term production growth profile. It plans to deploy nearly 25% of total 2011 capital budget for the E&P program.
Nexen is primarily focused in the North Sea, deepwater Gulf of Mexico & offshore West Africa. The company projected 7% production growth in 2011.
Recently, Nexen initiated a process to seek a joint venture partner for various portions of the company’s northeast British Columbia shale gas acreage.
